Article / 31 July 2014 at 9:15 GMT

Jakobsen: Argentinian outlook bleak after default

  • Plight of Argentina to deepen after default
  • GDP will shrink, inflation will rise
  • Kirchner could go after next general election

Argentinians now face months — and possibly years — of hardship following the South American country's default on its sovereign debt for a second time in 13 years. 

"The impact will get worse, not better," said Steen Jakobsen, Saxo Bank's chief economist, adding that the default will wipe 1%—2% off Argentina's GDP and exacerbate inflation which is already at dizzying levels. Officially, CPI is running at an annual rate of almost 12% but unofficial tallies peg it far higher at around 40%.

The impact, Jakobsen says, will be widely felt and will permeate all strata of society and business. State-owned energy companies (such as Enarsa) will be particularly hard hit as they will struggle to raise capital to finance their exploration activities and other operations. Argentina, which has a population of 43 million, is the third-largest energy market in Latin America.

Private-sector companies from small family outfits to behemoths of industry will suffer from the credit crunch too, and with efforts to resolve the situation now effectively in stalemate until year-end (thanks to US legal technicalities), the months ahead look bleak.

Jakobsen says several groups of participants in this economic drama share the blame for allowing events descend into such chaos. The "political experiment" conducted by the ruling Kirchner family in recent years is one culprit. And perhaps the only shred of good that might emerge from this mess is the possibility that the Kirchner clan will finally be ousted at the next general election.

This, Jakobsen says, should usher in a new breed of politicians willing to implement the reforms that the embattled Argentinian economy so desperately needs.

Argentina


Small clothing store in Buenos Aires closing down in aftermath of last default
Photo: Quique Kierszenbaum / Getty Images News


— Written by Clare MacCarthy

Steen Jakobsen is Saxo Bank's  chief economist and CIO. See his interview with Saxo TV here.
3y
Tano Tanito Tano Tanito
Hay cada salame opinando, y cada otro reproduciendo...
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maxiefinance23 maxiefinance23
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DanielJohnny DanielJohnny
lo que lo que se opina pasa "it is a self-fulfiling truth", nos K no controlan la opinion publica en el exterior y en particular nunca controlaran la de gente con guita. Pensa en eso tano energumeno.
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